<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Bellwether Exploration Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
BELLWETHER EXPLORATION COMPANY
1331 LAMAR STREET, SUITE 1455
HOUSTON, TEXAS 77010-3039
(713) 650-1025
Dear Stockholder,
You are cordially invited to attend the Annual Meeting of Stockholders of
Bellwether Exploration Company which will be held at the Houston Center Club,
1100 Caroline Street, Houston, Texas, on Friday, November 21, 1997, at 10:00
a.m., Houston time.
The Notice of the Annual Meeting and Proxy Statement, which are attached,
provide information concerning the matters to be considered at the meeting. The
annual report to Stockholders for fiscal year 1997 is being mailed to
Stockholders along with these proxy materials.
It is important that your shares be represented at this Annual Meeting,
regardless of the size of your holdings. We urge you to return the signed proxy
in the enclosed envelope as soon as possible. If you do attend the meeting in
person, you may withdraw your proxy and vote your stock if you so desire. We
value your opinions and encourage you to participate in the Annual Meeting by
voting your proxy.
Very truly yours,
/s/ J. DARBY SERE
J. Darby Sere
Chairman of the Board and
Chief Executive Officer
<PAGE>
BELLWETHER EXPLORATION COMPANY
1331 LAMAR STREET, SUITE 1455
HOUSTON, TEXAS 77010-3039
(713) 650-1025
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 21, 1997
To the Stockholders of
Bellwether Exploration Company:
The Annual Meeting of Stockholders of BELLWETHER EXPLORATION COMPANY (the
"Company") will be held at the Houston Center Club, 1100 Caroline Street,
Houston, Texas at 10:00 a.m., Houston time, on Friday, November 21, 1997, for
the following purposes:
1. To elect the nominees of the Board of Directors to serve until their
successors are duly elected and qualified.
2. To consider and act upon a proposal to ratify and approve the Board of
Directors' adoption of an amendment to increase the number of shares
of the Company's Common Stock available for distribution under of the
Bellwether Exploration Company 1996 Stock Incentive Plan.
3. To consider and act upon a proposal to ratify the appointment of KPMG
Peat Marwick LLP as the independent auditors of the Company for the
period ending December 31, 1997.
4. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
Stockholders of record at the close of business on October 10, 1997 are
entitled to notice of and to vote at the meeting and any adjournment(s) thereof.
You are cordially invited to attend the meeting. Whether or not you are
planning to attend the meeting, you are urged to complete, date and sign the
enclosed proxy and return it promptly.
Sincerely,
/s/ J. DARBY SERE
J. Darby Sere
Chairman of the Board
and Chief Executive Officer
Houston, Texas
October 27, 1997
================================================================================
YOUR VOTE IS IMPORTANT
TO ENSURE REPRESENTATION AT THE MEETING, PLEASE COMPLETE,
DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
POSTAGE-PAID ENVELOPE. NO ADDITIONAL POSTAGE IS NECESSARY
IF MAILED IN THE UNITED STATES.
================================================================================
<PAGE>
PROXY STATEMENT
_____________________________________
BELLWETHER EXPLORATION COMPANY
1331 Lamar Street, Suite 1455
Houston, Texas 77010-3039
(713) 650-1025
ANNUAL MEETING OF STOCKHOLDERS
November 21, 1997
INTRODUCTION
This Proxy Statement is being furnished in connection with the solicitation
of proxies by and on behalf of the Board of Directors of Bellwether Exploration
Company (the "Company") for use at the Annual Meeting of Stockholders of the
Company to be held on Friday, November 21, 1997 (the "Annual Meeting") at 10:00
a.m., Houston time, at the Houston Center Club, 1100 Caroline Street, Houston,
Texas, and at any adjournment(s) thereof, for the purposes set forth in this
Proxy Statement.
This Proxy Statement and the enclosed form of proxy are being mailed on or
about October 27, 1997 to the Stockholders of record as of October 10, 1997.
The annual report to Stockholders for the Company's fiscal year ended June 30,
1997 is also being mailed to Stockholders contemporaneously with this Proxy
Statement, although the annual report does not form a part of the materials for
the solicitation of proxies.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
Unless otherwise indicated, proxies in the form enclosed that are properly
executed, duly returned and not revoked will be voted in favor of:
(1) the election of the nine nominees to the Board of Directors of the
Company named herein;
(2) the approval of an amendment to increase the number of shares of
Company's Common Stock available for distribution under the Bellwether
Exploration Company 1996 Stock Incentive Plan (the "1996 Plan"); and
(3) the ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors for the Company for the period ending December
31, 1997.
The Board of Directors is not presently aware of other proposals which may
be brought before the Annual Meeting. In the event other proposals are brought
before the Annual Meeting, the persons named in the enclosed form of proxy will
vote in accordance with what they consider to be in the best interests of the
Company and its Stockholders.
-1-
<PAGE>
VOTING REQUIREMENTS
The Board of Directors of the Company has fixed the close of business on
October 10, 1997 as the record date (the "Record Date") for the determination of
Stockholders entitled to notice of and to vote at the Annual Meeting. On the
Record Date, the Company had issued and outstanding 13,884,965 shares of its
common stock, $.01 par value ("Common Stock"). A complete list of all
Stockholders entitled to vote at the Annual Meeting will be open for examination
by any Stockholder, during normal business hours for a period of ten days prior
to the Annual Meeting, at the offices of the Company at 1331 Lamar Street, Suite
1455, Houston, Texas 77010-3039. Such list will also be available at the Annual
Meeting and may be inspected by any Stockholder who is present. Only the record
owners of the Company's Common Stock on the Record Date are entitled to notice
of and to vote at the Annual Meeting.
QUORUM AND OTHER MATTERS
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock on the Record Date is necessary to constitute
a quorum at the Annual Meeting. Each share of Common Stock is entitled to one
vote, in person or by proxy, with respect to the election of directors and any
other proposal properly brought before the Annual Meeting.
Shares of Common Stock represented by a properly signed and returned proxy
will be counted as present at the Annual Meeting for purposes of determining a
quorum, without regard to whether the proxy is marked as casting a vote or
abstaining. Shares of Common Stock held by nominees which are voted on at least
one matter coming before the Annual Meeting will also be counted as present for
purposes of determining a quorum, even if the beneficial owner's discretion has
been withheld (a "non-vote") for voting on some or all other matters.
The holders of a majority of the total shares of Common Stock issued and
outstanding, whether present in person or represented by proxy, will constitute
a quorum for the transaction of business at the Annual Meeting. The election of
directors requires the favorable vote of the holders of a plurality of shares of
Common Stock present and voting, in person or by proxy, at the Annual Meeting.
Abstentions and broker non-votes have no effect on determinations of plurality
except to the extent that they affect the total votes received by any particular
candidate. A majority of the votes represented by the Stockholders present at
the Annual Meeting, in person or by proxy, is necessary for approval of the
amendment to increase the number of shares of Common Stock available for
distribution under the 1996 Plan and for ratification of the Company's auditors.
With respect to abstentions and broker non-votes, the shares will not be
considered present at the Annual Meeting for these matters so that abstentions
and broker non-votes will have the practical effect of reducing the number of
affirmative votes required to achieve a majority vote by reducing the total
number of shares from which the majority is calculated.
Votes at the Annual Meeting will be tabulated by an Inspector of Election
appointed by the Company.
PROXY INFORMATION
The enclosed form of proxy may be revoked at any time prior to its exercise
by executing a new proxy with a later date, by voting in person at the Annual
Meeting, or by giving written notice of revocation to Roland E. Sledge,
Secretary of the Company, at any time before the proxy is voted at the Annual
Meeting. Please ensure that your shares will be voted by completing, signing,
dating and returning the enclosed form of proxy in the enclosed postage-paid
envelope.
-2-
<PAGE>
BENEFICIAL OWNERSHIP OF SECURITIES
MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the Record Date, the name, address,
and number of shares of Common Stock owned beneficially by (a) all persons known
to the Company to be the beneficial owners of more than five percent of the
outstanding shares of Common Stock, (b) each director, (c) each nominee for
director, (d) each of the executive officers named in the Summary Compensation
Table, and (e) all executive officers and directors of the Company as a group.
The information set forth in the following table is based on public filings made
with the Securities and Exchange Commission (the "Commission") as of the Record
Date and certain information supplied to the Company by the persons listed
below. Unless otherwise indicated, all shares of Common Stock are owned
directly and each owner has sole voting and investment power with respect
thereto.
NAME AND AMOUNT AND NATURE PERCENT
ADDRESS OF OF BENEFICIAL OF
BENEFICIAL OWNER OWNERSHIP CLASS
---------------- --------- -----
Alpine Investment Partners 979,832 (a) 7.1
Rho Management Trust III
767 Fifth Avenue
New York, New York 10153
Allstate Insurance Company 970,584 7.0
3075 Sanders Road, Suite G5B
Northbrook, Illinois 60062
Torch Energy Advisors Incorporated 250,000 (b) 1.8
1221 Lamar Street, Suite 1600
Houston, Texas 77010
J.P. Bryan 397,372 (c) 2.8
J. Darby Sere 351,340 (d) 2.5
A.K. McLanahan 14,750 (e) *
Vincent H. Buckley 13,000 (f) *
Dr. Jack Birks 13,000 (f) *
Michael D. Watford 56,497 (g) *
C. Barton Groves 191,625 (h) 1.4
Kenneth W. Welch 100,312 (i) *
Habib Kairouz 10,000 (j) *
Charles C. Green, III 160,000 (k) 1.1
Townes G. Pressler 2,500 (l) *
All officers and directors as 1,341,146 (m) 8.9
a group (13 persons)
_________________
* Under 1%
-3-
<PAGE>
(a) Joshua Ruch and Rho Management Partners L.P. ("Rho") may be deemed to be
the beneficial owners of the shares of Common Stock held in the name of
Alpine Investment Partners ("Alpine") and Rho Management Trust III
("Trust"). Mr. Ruch and Rho share voting and dispositive power over
728,590 shares of Common Stock held in the name of Alpine and Mr. Ruch and
the Trust share voting and dispositive power over 225,000 shares of Common
Stock held in the name of the Trust. Mr. Ruch also has sole voting and
dispositive power over 26,242 of the shares shown. Amount shown includes
1,242 shares beneficially owned by Mr. Ruch held in the name of XBF Inc.
(b) Of the 250,000 shares of Common Stock indicated as beneficially owned by
Torch Energy Advisors Incorporated ("Torch"), 100,000 shares are issuable
pursuant to a warrant and the remainder are owned by Torch.
(c) Includes the shares of Common Stock owned by Torch described in note (b).
Mr. Bryan is a director of and a holder of options to purchase 24% of the
outstanding shares of common stock of Torch Acquisition Company ("TAC") on
a fully diluted basis. Mr. Bryan disclaims beneficial ownership of these
shares. Includes 134,875 shares of Common Stock which Mr. Bryan has the
right to acquire within 60 days pursuant to options. Excludes 6,250 shares
of Common Stock owned by Mr. Bryan's wife, as to which he has no voting or
dispositive power.
(d) Includes 309,450 shares of Common Stock that Mr. Sere has the right to
acquire within 60 days pursuant to options and 1,400 shares of Common Stock
owned by Mr. Sere's minor son. Does not include 7,600 shares of Common
Stock owned by Mr. Sere's wife, as to which Mr. Sere has no voting or
dispositive power.
(e) Includes 8,000 shares of Common Stock which Mr. McLanahan has the right to
acquire within 60 days pursuant to options.
(f) Includes 13,000 shares of Common Stock which the director has the right to
acquire within 60 days pursuant to options.
(g) Includes 44,000 shares of Common Stock that Mr. Watford has the right to
acquire within 60 days pursuant to options.
(h) Includes 180,000 shares of Common Stock that Mr. Groves has the right to
acquire within 60 days pursuant to options.
(i) Includes 90,000 shares of Common Stock that Mr. Welch has the right to
acquire within 60 days pursuant to options.
(j) Includes 10,000 shares of Common Stock which Mr. Kairouz has the right to
acquire within 60 days pursuant to options.
(k) Includes 150,000 shares of Common Stock which Mr. Green has the right to
acquire within 60 days pursuant to options.
(l) Represents 2,500 shares of Common Stock owned by Mr. Pressler, a nominee
for director of the Company.
(m) Includes the following: the shares of Common Stock beneficially owned by
Mr. Bryan as described in note (c); shares of Common Stock which officers
and directors of the Company have the right to acquire pursuant to options,
as described in notes (d), (e), (f), (g), (h), (i), (j) and (k) and 13,500
and 8,500 shares of Common Stock that Michael B. Smith and Roland E.
Sledge, respectively, have the right to acquire within 60 days pursuant to
options.
-4-
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
NOMINEES
Townes G. Pressler and each incumbent director identified in the table
below are nominees for election as directors of the Company. The term of office
for which the following persons are nominated will expire at the time of the
1998 Annual Meeting of Stockholders of the Company or when their respective
successors shall have been elected and qualified. It is the intention of the
persons named in the accompanying proxy that proxies will be voted for the
election of the nine nominees named below unless otherwise indicated thereon.
Should any nominee for the office of director named herein become unable or
unwilling to accept nomination or election, the person or persons acting under
the proxies will vote for the election in his stead such other person as the
Board of Directors may recommend. The Board of Directors has no reason to
believe that any of the nominees will be unable to serve if elected to office
and, to the knowledge of the Board of Directors, the nominees intend to serve
the entire term for which election is sought. The Bylaws of the Company provide
for the Board of Directors to consist of no less than three and no more than
nine members.
Directors will be elected by a plurality vote of the shares of Common Stock
present, in person or by proxy, at the Annual Meeting. The Board of Directors
recommends a vote FOR each of the nominees listed and, unless marked to the
contrary, proxies received from Stockholders will be voted for the election of
such nominees.
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information with respect to the nominees for
director and present executive officers of the Company and the Company's wholly
owned subsidiary, Odyssey Petroleum Company ("Odyssey"). Each executive officer
has been elected to serve until his successor is duly appointed or elected by
the Board of Directors or his earlier removal or resignation from office.
COMPANY
NAME AGE POSITION SINCE PRESENT COMPANY POSITION
- ----------------- ----- -------------- ------------------------------------
J. Darby Sere 50 1988 Chairman of the Board* and Chief
Executive Officer
C. Barton Groves 59 1994 Director of the Company*; President
of Odyssey
William C. Rankin 48 1997 Senior Vice President and Chief
Financial Officer
Roland E. Sledge 52 1987 Vice President and Secretary
Michael B. Smith 34 1995 Vice President and Treasurer
Kenneth W. Welch 40 1994 Vice President - Land of Odyssey
Dr. Jack Birks 77 1988 Director*
J. P. Bryan 57 1987 Director*
-5-
<PAGE>
COMPANY
NAME AGE POSITION SINCE PRESENT COMPANY POSITION
- ------------------- - ----- -------------- --------------------------------
Vincent H. Buckley 75 1987 Director*
Charles C. Green III 51 1992 Director*
Habib Kairouz 31 1994 Director*
A. K. McLanahan 71 1987 Director*
Townes G. Pressler 61 N/A N/A*
__________________
* Nominee for director
Mr. Sere has been the Company's Chairman of the Board since June 2, 1997,
Chief Executive Officer since January 25, 1995, and a Director since March 25,
1988. Mr. Sere was the Company's Chief Executive Officer from March 7, 1988 to
June 29, 1994 and President from March 7, 1988 to June 2, 1997. He was a
consultant with Patrick Petroleum Company, an independent oil and gas company
("Patrick"), from September 1987 to February 1988 and was a co-founder,
President, Chief Executive Officer and a Director of Bayou Resources, Inc., an
independent oil and gas exploration and development company, from January 1982
until its acquisition by Patrick in August 1987. Mr. Sere served in various
positions with Howell Corporation and Howell Petroleum Corporation, both
independent oil and gas companies, from 1977 to 1981, the last of which was
Executive Vice President.
Mr. Groves has been President of Odyssey and a Director of the Company
since August 26, 1994. He was President of the managing general partner of
Odyssey Partners Ltd., the predecessor in interest of Odyssey (the "Odyssey
Partnership"), from 1986 to August 1994. Between 1973 and 1986, Mr. Groves held
various positions with Diamond Shamrock Corporation, including President of
Diamond Shamrock Exploration Company, its subsidiary.
Mr. Rankin has been Senior Vice President and Chief Financial Officer of
the Company since September 29, 1997. Prior to joining the Company, Mr. Rankin
was Vice President and Chief Financial Officer of Gulfstar Energy, Inc. From
February 1996 to March 1997, he was Senior Vice President and Chief Financial
Officer of Kelley Oil and Gas Corporation ("Kelley") and from March 1994 until
he joined Kelley, Vice President and Chief Financial Officer of Kelley's largest
shareholder, Contour Production Company. From December 1985 to November 1993,
Mr. Rankin was a Financial Officer with Hadson Energy Resources Corporation and
its predecessors, serving the last four years as Senior Vice President, Chief
Financial Officer and a Director.
Mr. Sledge has been Vice President and Secretary of the Company since
September 1, 1987. He is Senior Vice President, Secretary and General Counsel
of Torch and has been an officer with Torch and its predecessor since July 1983.
He was an attorney with the law firm of Watt, White & Craig, Houston, Texas from
1980 to 1983.
Mr. Smith has been Vice President and Treasurer of the Company since
January 1, 1997 and was Vice President and Chief Financial Officer of the
Company from September 1995 through December 1996. Mr. Smith joined Torch in
April 1995 as Vice President of Acquisitions and Financial Analysis and in
September 1995 became Torch's Chief Financial Officer. Prior to joining Torch,
Mr. Smith held various positions in finance with Atlantic Richfield Company
beginning in August 1989, the last of which was Financial Advisor in the
Corporate Treasury Department.
-6-
<PAGE>
Mr. Welch has been Vice President-Land of Odyssey since August 26, 1994.
From 1987 to August 1994, Mr. Welch was Land Manager of the Odyssey Partnership.
Between 1979 and 1987, Mr. Welch held Area Landman and Senior Landman positions
with Enseach Exploration, Inc., Penn Resources, Inc., and Moore McCormack
Energy, Inc.
Dr. Birks has been a Director of the Company since 1988. He was Chairman
of the Board of Midland & Scottish Resources Plc. until September 30, 1997. He
is life President of British Marine Technology Limited. Dr. Birks served as
Chairman of the Board of North American Gas Investment Trust Plc. from 1989
until his retirement in 1995; as Chairman of the Board of British Maritime
Technology Limited from 1985 to 1995; as Chairman of the Board of Charterhouse
Petroleum Plc from 1982 to 1986; as Chairman of the Board of London American
Energy Inc. from 1982 to 1988; as Vice Chairman of the Board of Petrofina (UK)
Limited from 1986 to 1989; and as a Director of George Wimpey Plc, a
construction company, from 1982 to May 1990. He was appointed as a Director of
Gulf Indonesia Resources Limited in August 1997.
Mr. Bryan has served as a Director of the Company since June 2, 1997. He
was the Company's Chairman of the Board from August 31, 1987 to June 2, 1997,
and Chief Executive Officer from June 30, 1994 to January 25, 1995 and from
August 31, 1987 to March 6, 1988. On January 25, 1995, Mr. Bryan became Chief
Executive Officer of Gulf Canada Resources Limited. He has been Chairman of the
Board of Nuevo Energy Company ("Nuevo") since March 1990 and was Chief Executive
Officer of Nuevo from March 1990 to January 1995. Mr. Bryan was also Chairman
of the Board and Chief Executive Officer of Torch and its predecessor from
January 1985 to May 1997. Mr. Bryan is also a member of the Board of Directors
of Republic Waste Industries.
Mr. Buckley has been a Director of the Company since 1987. He has been Of
Counsel to the law firm of Liddell, Sapp, Zivley, Hill & LaBoon since January
1989. He also serves as a Director of Enron Cactus III Corporation, an oil and
gas company, and as a Director on the Houston Medical Area Advisory Board of
Texas Commerce Bank National Association. Mr. Buckley was President and Chief
Executive Officer of Cockburn Oil Corporation from August 1984 until September
1988, and was Vice President of Apache Corporation, an oil and gas company,
from October 1982 to August 1984.
Mr. Green has been a Director of the Company since February 24, 1997. He
was the Company's Executive Vice President and Chief Financial Officer from
January 1, 1997 to September 3, 1997, and Vice President and Assistant Secretary
from December 31, 1992 to December 31, 1996. Since September 4, 1997, Mr. Green
has been Executive Vice President and Chief Financial Officer of Castle Tower
Holding Corporation, a company involved in the development and management of
telecommunications infrastructure, including wireless support. He was Torch's
Vice President and Chief Financial Officer from November 1992 through February
1994, President and Chief Operating Officer from February 1994 to May 1995, and
Vice Chairman and Chief Investment Officer from May 1995 to December 1996. For
over ten years prior to joining Torch, Mr. Green was President and Chief
Operating Officer of Treptow Development Company, a real estate development
company. Previously, at J.P. Morgan Investment Management he was Vice President
and Senior Portfolio Manager and Head of International Fixed Income in London
(1974-1982), and was Assistant Vice President in the Investment Department in
New York (1973-1974), and Investment Research Officer and Energy Analyst in New
York (1969-1973). He has been a Director of Teletouch Communications, Inc.
since May 1995. Mr. Green is a Chartered Financial Analyst.
Mr. Kairouz has been a Director of the Company since August 26, 1994. Mr.
Kairouz is a Managing Director of Rho Management Company, Inc., an investment
advisory firm which serves as advisor to the principal investor of Alpine
Investment Partners. Prior to that, Mr. Kairouz was employed for five years in
investment banking at the firms of Jesup & Lamont Securities, Inc. and more
recently, Reich & Co., Inc. Under the agreement pursuant to which the Company
acquired Odyssey, certain former owners ("Owners") of the Odyssey Partnership
acquired the right to designate one representative to the Company's Board of
Directors. Pursuant to such agreement, until the earlier to occur of the five-
year anniversary of the closing of such acquisition or the date such Owners no
longer own at least 5% of the outstanding Common Stock of the Company, the
Company is obligated to
-7-
<PAGE>
nominate and recommend to the Company's Stockholders one representative of the
Owners. Mr. Kairouz is the person so designated by the Owners.
Mr. McLanahan has been a Director of the Company since November 6, 1987.
He has been a First Vice President of PaineWebber Incorporated ("PaineWebber")
since January, 1995. He was a Vice President of Kidder Peabody & Co., Inc., an
investment banking firm, from April 1985 until its sale to PaineWebber in 1995.
From April 1982 to April 1985, he served as a Senior Vice President and Branch
Office Manager of Donaldson, Lufkin & Jenrette, Inc., an investment banking
firm.
Mr. Pressler has been owner and President of Tepee Petroleum Company, Inc.,
an exploration and production company with operations in Texas, Louisiana and
Oklahoma, and Pressler Petroleum Consultants, a reservoir engineering consulting
firm, since 1985. He currently serves as a Trustee of Pacific American
Investors Trust and as a Director of Korea Industrial Holdings, Ltd. From 1983
- - 1985, he was President, Chief Operating Officer and Director of Philip Hill
Energy, Inc., PHE (Texas) Inc. and PHE (Ohio) Inc., three exploration and
production companies owned by Philip Hill Investment Trust, London. From 1979 -
1983, he was co-founder, President and Director of Republic Oil and Gas Corp., a
private exploration and production company. Mr. Pressler is a registered
professional engineer in the state of Texas and has 38 years of experience in
the oil and gas industry.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth for the past three
years cash compensation and certain other components of the compensation of J.
Darby Sere, the Company's Chairman of the Board and Chief Executive Officer, C.
Barton Groves, President of Odyssey, and Kenneth W. Welch, Vice President-Land
of Odyssey, who were the only officers of the Company and its wholly owned
subsidiary, Odyssey, in fiscal 1997 whose total salary and bonus exceeded
$100,000. All other executive officers of the Company, other than William C.
Rankin who joined the Company in September 1997 as Senior Vice President and
Chief Financial Officer, are also officers or employees of Torch and provide
services to the Company (including holding executive officer positions with
Company) pursuant to a Management Agreement between the Company and Torch (the
"Management Agreement"). Executive officers who perform services for the
Company under the Management Agreement receive no compensation from the Company
other than the grant of stock options under the 1994 Stock Incentive Plan ("1994
Plan") and the 1996 Plan and are all compensated primarily by Torch.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS PAYOUTS
---------------------------------------- ---------------------- ------------------
Other All
Name and Annual Restricted Number Other
Principal COMPENSA- Stock of LTIP COMPENSA-
Position Year Salary Bonus tion(1) Award(s) Options Payouts tion(2)
-------- ---- ------ ----- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Darby Sere 1997 $183,000 $ 70,000 (3) 0 0 55,000 (4) 0 $ 26,193
Chairman of the 1996 171,000 50,000 0 0 0 0 8,752
Board and Chief 1995 158,000 0 0 0 25,000 0 8,450
Executive Officer
C. Barton Groves 1997 $160,500 $ 32,500 (3) 0 0 15,000 (4) 0 $ 30,500
President of 1996 154,000 30,000 0 0 0 0 30,500
Odyssey 1995 125,000 0 0 0 165,000 0 21,013
Kenneth W. Welch 1997 $102,150 $ 17,500 (3) 0 0 7,500 (4) 0 $ 12,178
Vice President - 1996 98,000 15,000 0 0 0 0 10,750
Land of Odyssey 1995 80,486 0 0 0 82,500 0 7,899
</TABLE>
(1) These amounts do not include: the value of the benefit to Mr. Sere of the
use of a Company-owned automobile used primarily for commuting to and from
the Company; the expense of a disability insurance
-8-
<PAGE>
policy under which Mr. Sere is insured, the premiums of which are paid by
the Company; and the expenses of Mr. Sere's membership in certain
professional and athletic clubs. While some personal benefit may be derived
from the foregoing, the expenses are considered by the Company to be
ordinary, necessary and reasonable to its business and such expenses did
not exceed 10% of Mr. Sere's salary in fiscal 1997.
(2) Represents premiums paid on an insurance policy for Mr. Sere and an annual
payment pursuant to a Simplified Employee Pension Plan for Messrs. Sere,
Groves and Welch. Also includes $17,000 per year for personal benefit
plans paid to Mr. Groves in lieu of certain Company benefits and amounts
paid for a car allowance to Mr. Groves and Mr. Welch.
(3) Represents the bonuses paid during fiscal 1997 based upon performance in
fiscal 1996. On October 1, 1997, Messrs. Sere, Groves and Welch were
granted bonuses of $100,000, $50,000 and $25,000, respectively, in
recognition of their performance during fiscal 1997.
(4) Represents the number of options granted during fiscal 1997 based upon
performance in fiscal 1996. On September 10, 1997, Messrs. Sere, Groves
and Welch were granted, under the 1996 Plan, options to purchase 55,000,
20,000 and 10,000 shares of Common Stock, respectively, in recognition of
their performance during fiscal 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
None
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following table sets forth certain information concerning the exercise
in fiscal 1997 of options to purchase Common Stock by the executive officers
named in the Summary Compensation Table and the number and value of unexercised
options to purchase Common Stock held by such individuals at June 30, 1997.
Also reported are the values for "in-the-money" options which represent the
positive spread between the exercise price of any such existing stock options
and the June 30, 1997 price of the Common Stock. The actual amount, if any,
realized upon exercise of stock options will depend upon the market price of the
Common Stock relative to the exercise price per share of Common Stock at the
time the stock option is exercised. There is no assurance that the values of
unexercised, "in-the-money" stock options reflected in this table will be
realized.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE AT JUNE 30, 1997 JUNE 30, 1997(1)
NAME ON EXERCISES REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Darby Sere -- -- 314,450 22,890 $1,433,883 $118,027
C. Barton Groves -- -- 180,000 --- $ 781,875 ---
Kenneth W. Welch -- -- 90,000 --- $ 390,938 ---
</TABLE>
(1) Based upon $10.03125, the closing price of Common Stock on
June 30, 1997.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
At this time, the Company does not have a long-term incentive plan for its
employees, other than the 1988 Non-Qualified Stock Option Plan ("1988 Plan"),
the 1994 Plan and the 1996 Plan.
-9-
<PAGE>
1988 PLAN
In 1988, the Board of Directors adopted and stockholders approved the
Company's 1988 Plan. The Company reserved 131,325 shares of Common Stock under
the 1988 Plan and no further options will be granted under the 1988 Plan.
Options under the 1988 Plan were granted by the Compensation Committee to
directors, executive officers or key employees of the Company. The exercise
price of an option is 100% of the fair market value on the date of the grant.
Options granted under the 1988 Plan may be exercised at any time for up to 10
years from the date of grant but prior to termination of the 1988 Plan on March
25, 1998, or such shorter time as the Compensation Committee determines.
1994 PLAN
In 1994, the Board of Directors adopted and stockholders approved the
Bellwether Exploration Company 1994 Plan. The Company has reserved 825,000
shares of Common Stock under the 1994 Plan. The Company has issued options to
purchase an aggregate of 825,000 shares of Common Stock under the 1994 Plan.
The 1994 Plan is administered by the Compensation Committee of the Board of
Directors. The Compensation Committee has full power to select, from among the
persons eligible for awards, the individuals to whom awards are granted, to make
any combination of awards to any participant and to determine the specific terms
of each grant, subject to the provisions of the 1994 Plan. The option price per
share of Common Stock deliverable upon the exercise of a stock option is 100% of
the fair market value of a share of Common Stock on the date the stock option is
granted.
Directors, officers and key employees of the Company and officers and key
employees of Torch who render services to the Company under the Management
Agreement are eligible to receive stock options or performance shares under the
1994 Plan.
1996 PLAN
In 1996, the Board of Directors adopted and the stockholders approved the
1996 Plan. The Company has reserved 500,000 shares of Common Stock under the
1996 Plan. Members of the Board of Directors who are not employed by the
Company receive annual automatic grants of stock options. A general description
of the 1996 Plan appears under Proposal II - Approval of Amendment to the 1996
Stock Incentive Plan.
As of October 10, 1997, the Company had issued options to purchase an
aggregate of 474,500 shares of Common Stock under the 1996 Plan. Mr. William C.
Rankin has recently been granted 100,000 shares of Common Stock under the 1996
Plan, subject to shareholder approval of the amendment to the 1996 Plan,
described herein.
INFORMATION CONCERNING THE OPERATION OF THE BOARD OF DIRECTORS
The small size of the Company's Board of Directors lends itself to frequent
informal discussions of Company matters among its members. The Board of
Directors met formally five times and executed six unanimous consents during the
fiscal year ended June 30, 1997.
The Company has a Compensation Committee comprised of Messrs. Birks,
McLanahan and Buckley (the "Compensation Committee"). The function of the
Compensation Committee is to administer the 1988 Plan, the 1994 Plan and the
1996 Plan, to establish the compensation of the Company's Chief Executive
Officer and to review the compensation of the other officers of the Company and
Odyssey. The Compensation Committee also generally meets quarterly to review
Torch's performance under the Management Agreement, which agreement may be
terminated by the Compensation Committee.
-10-
<PAGE>
The Company has an Audit Committee composed of Messrs. McLanahan, Buckley
and Dr. Birks (the "Audit Committee"). The primary function of the Audit
Committee is to review the annual audit of the Company's financial statements
with the Company's independent accountants. The Audit Committee met two times
during fiscal 1997.
During fiscal 1997, each director attended at least 75% of the total number
of meetings of the Board of Directors, and 75% of the total number of meetings
held by all Committees on which he served.
The Company does not have a nominating committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The service of the members of the Company's Compensation Committee does not
create any corporate interlocks or insider participation between the
Compensation Committee and another entity.
COMPENSATION OF DIRECTORS
Directors of the Company who are neither officers nor employees of the
Company or Torch received $3,000 per quarter during the fiscal year ended June
30, 1997, and were reimbursed for reasonable expenses incurred in attending such
meetings. Commencing with the fourth quarter of 1997, such quarterly fees will
be increased to $5,000. Each member of the Compensation and Audit Committees
also received $1,000 per meeting. Directors who are officers or employees of
the Company or Torch received no additional compensation for services as members
of the Board of Directors. The Company paid a total of $71,000 in director fees
for the fiscal year ended June 30, 1997. Each Non-Employee Director (as defined
herein) receives an annual grant of 4,000 options under the 1996 Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), requires the Company's directors and executive officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file with the Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent stockholders are
required by the Commission's regulations to furnish the Company with copies of
all Section 16(a) forms they filed with the Commission.
Based on a review of the copies of such reports furnished to the Company,
the Company believes that all reporting obligations under Section 16(a) were
satisfied.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for establishing policies
concerning the compensation of the Company's executive officers. The report of
the Compensation Committee describing the Company's compensation philosophy and
objectives is presented below.
COMPENSATION COMMITTEE REPORT
As members of the Compensation Committee, we are responsible for the
administration of the Company's 1988 Plan, the 1994 Plan and the 1996 Plan. We
also evaluate compensation levels of management and review with the Board of
Directors the various factors affecting compensation of the Company's and
Odyssey's highest paid officers. In addition, the Compensation Committee
considers management succession and related matters.
-11-
<PAGE>
The Compensation Committee has reviewed the compensation of J. Darby Sere,
the Chairman of the Board and Chief Executive Officer of the Company, C. Barton
Groves, President of Odyssey, and Kenneth W. Welch, Vice President-Land of
Odyssey, for 1997 and concluded that the compensation of each aforesaid
individual was reasonable in view of the Company's performance and their
respective contributions to that performance. Generally, their compensation was
comprised of three elements: (1) base compensation; (2) incentive bonus; and (3)
stock options.
The Compensation Committee continues to endorse the compensation policy of
the Company, which is that a substantial portion of the annual compensation of
each officer must be related to the performance of the Company, as well as the
particular contribution of each officer.
For fiscal 1997, the Compensation Committee adopted an Annual and Long-Term
Incentive Plan to establish guidelines for base compensation, incentive bonuses
and stock options with the assistance of KPMG Peat Marwick LLP, who had prepared
an Executive and Director Compensation Review in fiscal 1996. Performance
measures and targets were established.
Due to the acquisition by the Company of properties from partnerships
managed by Torch ("Partnership Transactions") in April 1997, all of the
Company's targets were substantially exceeded. For fiscal 1997 as compared to
fiscal 1996, the Compensation Committee notes that: (1) proved oil and gas
reserves increased 412%; (2) proved reserves were added at a cost of $4.23 per
barrel; (3) operating cash flows increased 151%; and (4) net income increased
373%.
As provided in the Administrative Services Agreement, the salaries and
bonuses of Roland E. Sledge, Vice President and Secretary of the Company, and
Michael B. Smith, Vice President and Treasurer of the Company, are paid by
Torch.
Effective October 1, 1997, J. Darby Sere was granted a salary increase of
$42,000 for a total base salary of $228,000 per year, plus a bonus of $100,000.
This bonus and salary increase were granted because of Mr. Sere's overall
leadership of the Company, his appointment as Chairman of the Board and, in
particular, his efforts in evaluating, negotiating and financing Partnership
Transactions. C. Barton Groves was granted a bonus of $50,000 and a salary
increase of $7,800 for a total base salary of $169,800 per year, effective
October 1, 1997. This bonus and salary increase were granted because of Mr.
Groves' overall leadership of the Company's exploration program and, in
particular, his efforts in leading the identification and subsequent sale of the
West Jacksonville Prospect for a significant cash profit and a 25% carried
interest in the 3-D seismic program. Mr. Kenneth W. Welch was granted a bonus
of $25,000 and a salary increase of $4,800 for a total base salary of $108,000,
effective October 1, 1997. This bonus and salary increase were granted because
of Mr. Welch's efforts in the leasing and subsequent sale of the West
Jacksonville Prospect.
The Compensation Committee believes that stock options serve as important
long term incentives for executive officers of the Company and Odyssey by
encouraging continued employment and commitment to the performance of the
Company. Moreover, the Compensation Committee believes that stock options are
an excellent means to align the interests of the Company's officers with those
of its stockholders.
The number of options that the Compensation Committee grants to executive
officers is based on individual performance and level of responsibility. In
addition, the Compensation Committee strives to grant options at a level
sufficient to provide a strong incentive for executives to work for the long-
term success of the Company. The Compensation Committee does not consider the
number of options currently held by an executive officer in determining
individual grants, since such a factor would create an incentive to exercise
options and sell the shares.
-12-
<PAGE>
On September 10, 1997, Messrs. Sere, Groves and Welch were considered for
and granted options to purchase 55,000, 20,000 and 10,000 shares of Common
Stock, respectively. The grants of stock options to Messrs. Sere, Groves and
Welch were made in recognition of Mr. Sere's efforts in the Partnership
Transactions and Messrs. Groves' and Welch's efforts in the identification,
leasing and sale of the West Jacksonville Prospect.
On September 12, 1997, the Compensation Committee approved an offer for
William C. Rankin to become the new Senior Vice President and Chief Financial
Officer of the Company with a salary of $174,000 and a grant of stock options to
purchase 100,000 shares of the Company's Common Stock.
The main elements of the Company's compensation policy of base salary,
bonus and stock options constitute an appropriate reward for the short and long-
term efforts of the Company's officers and officers of its principal
subsidiaries in order to support the future development of the Company and
growth in stockholder value.
Dr. Jack Birks
Vincent H. Buckley
A. K. McLanahan
TRANSACTIONS WITH RELATED PERSONS
RELATIONSHIP WITH TORCH AND AFFILIATES
ADMINISTRATIVE SERVICES AGREEMENT
The Company has been party to an Administrative Services Agreement with
Torch ("Administrative Services Agreement") since 1987. Torch, headquartered in
Houston, Texas, is primarily engaged in the business of providing outsourcing
services for clients in the energy industry with respect to the acquisition and
divestiture, exploration, development, exploitation and operation of oil and gas
properties, including management advisory services, legal, financial and
accounting services, and the marketing of oil and gas. In addition, Torch
provides energy industry investment management and advisory services for public
companies and private investors. The Administrative Services Agreement is
subject to termination by the Company upon one year's prior notice. The
Administrative Services Agreement has an initial term expiring on December 31,
1999 and may not be terminated by Torch prior to such date.
The Administrative Services Agreement requires Torch to administer certain
activities of the Company for a monthly fee. These administrative services
include providing the Company with office space, equipment and supplies,
accounting, legal, financial, geological, engineering, technical and insurance
professionals, maintaining the books and records of the Company, assisting the
Company in determining its capital requirements, preparing any reports or other
documents required by governmental authorities, analyzing economic and other
data related to the Company's business and otherwise providing general
management services and business advice to the Company. The Company presently
intends to continue to operate under the Administrative Services Agreement.
The monthly fee payable to Torch under the Administrative Services
Agreement is equal to (i) one-twelfth of 2% of the book value of the Company's
assets, excluding cash and cash equivalents, plus (ii) 2% of operating cash
flows during such month less 20% of overhead on Torch operated properties. The
fees paid for fiscal 1997 were $2.3 million. The Company believes that the
terms and fees under the Administrative Services Agreement are comparable with
those that could be negotiated with a third party in an arm's length transaction
and are fair to the Company.
In April 1997, Torch was issued 150,000 shares of the Company's Common
Stock and a warrant to purchase 100,000 shares of the Company's Common Stock at
$9.90 per share for advisory services rendered in connection with the
Partnership Transactions. The Company's Common Stock was valued at $1.2
million, and the
-13-
<PAGE>
warrant was valued at $300,000. Torch was also a selling partner in the
Partnership Transactions through its ownership of general partnership and
working interests in the partnerships programs. As a result, Torch was paid
$18.4 million for such interests.
Under the Administrative Services Agreement, the monthly fee for
administrative services does not apply to extraordinary investing and financing
services that Torch may agree to provide to the Company upon the Company's
request. For such investing and financing services the Company pays Torch a fee
on an hourly basis for Torch employees providing such services, certain overhead
expenses with respect to such Torch employees and any related expenses. The
Company has not paid any fees for these services during the fiscal 1997.
The Company has agreed to indemnify Torch and its affiliates for
liabilities incurred by Torch or its affiliates for actions taken under the
Administrative Services Agreement, other than acts of fraud, willful misconduct
or gross negligence of Torch or its affiliates or any of their employees.
In the course of its business, Torch generates potential investment
opportunities in oil and gas properties, processing plants, gathering systems
and pipelines, and other oil and gas assets (collectively, "Investments").
Under the Administrative Services Agreement and an agreement between Torch and
Nuevo pertaining to various services, Torch is required to offer to the Company
and Nuevo all Investments that are within the scope of the Company's or Nuevo's
business.
The business and acquisition strategy of the Company and Nuevo may overlap
regarding certain Investments. The Company, Nuevo and Torch have adopted a
policy regarding the rights as between Nuevo and the Company pertaining to Torch
generated Investments which Torch is required to offer to the Company and Nuevo.
If an Investment is located in the Company's Area of Exclusive Interest (as
defined herein), the Investment will be offered first to the Company. If an
Investment is located in Nuevo's Area of Exclusive Interest, the Investment will
be offered first to Nuevo. Investments located outside of the Areas of
Exclusive Interest of the Company and Nuevo or in the Areas of Exclusive
Interest of both the Company and Nuevo will be offered by Torch to both the
Company and Nuevo. Unless the Company and Nuevo agree otherwise, the Company
will be entitled to acquire a 20% interest in the assets representing the
Investment, and Nuevo will be entitled to acquire the remaining 80%. With
respect to assets that form part of an Investment which is not capable of
division, Torch will allocate such assets between Nuevo and the Company in a
manner deemed fair and reasonable by Torch, whose decision shall be final and
binding.
The Company's Area of Exclusive Interest is defined as (i) for Investments
in an oil and gas property, any geographic area which produces from the same
formation as the proposed Investment and in which the Company owns proved
reserves with a discounted present value of future net cash flows of $500,000 or
more, and (ii) for Investments that are not an oil and gas property, any area in
which the Company owns a non-oil and gas property investment with a book value
of over $100,000. Nuevo's Area of Exclusive Interest is defined as (i) for
Investments in an oil and gas property, any geographic area which produces from
the same formation as the proposed Investment and in which Nuevo owns proved
reserved with a discounted present value of future net cash flows of $5 million
or more, and (ii) for Investments that are not an oil and gas property, any area
in which Nuevo owns a non-oil and gas property investment with a book value of
over $1 million.
The Company will continue to generate its own Investments in the future,
and neither Torch nor Nuevo will have any right to participate in such
Investments. Decisions to accept an Investment generated by Torch are made by
the Company's management and Board of Directors, some members of which are also
members of Torch's executive management. Two of the Company's officers are
officers of Torch and have an equity interest in Torch. A director of the
Company also holds significant options to purchase stock of Torch, which, if
exercised, would constitute a substantial equity interest in Torch. Two of the
directors of the Company were formerly officers of Odyssey.
-14-
<PAGE>
Torch also invests in oil and gas assets for its own account and may do so
in the future. In accordance with the Administrative Services Agreement, Torch
may not acquire an Investment within the scope of the Company's business and
acquisition strategy without first offering such Investment to the Company
pursuant to the criteria set forth above. No assurances can be made, however,
that the investment criteria of future investment vehicles formed by Torch will
not compete with the Company's acquisition strategy or that such investment
vehicles will not acquire Investments that the Company would otherwise propose
to acquire.
The Compensation Committee of the Board of Directors, which is composed of
persons who are not employees of Torch or the Company, meets quarterly to review
Torch's performance under the Administrative Services Agreement.
OTHER RELATIONSHIPS WITH TORCH
Torch markets a portion of the oil and natural gas production for certain
properties in which the Company owns an interest. For fiscal 1997, marketing
fees paid by the Company to Torch amounted to $646,000.
Torch began operating the Snyder Gas Plant ("Gas Plant") in December 1993
pursuant to an operating agreement with the Company and other interest owners in
the Gas Plant. The amount paid to Torch in connection with such operations
during fiscal 1997 was $49,000.
Torch operates certain oil and gas interests owned by the Company. The
Company is charged, on the same basis as other third parties, for all customary
expenses and cost reimbursements associated with these activities. Torch's
overhead charges for these activities for the year ended June 30, 1997 were
$729,000.
Costs of evaluating potential property acquisitions and due diligence
conducted in conjunction with acquisitions are incurred by Torch at the
Company's request. The Company was charged $650,000 for such costs in fiscal
1997.
On September 30, 1996, TAC, a company formed by executive management of
Torch, acquired all of the outstanding shares of capital stock of Torch from
United Investors Management Company ("United"), a subsidiary of Torchmark
Corporation. J.P. Bryan, a director of the Company, is also Chairman of the
Board of TAC and owns options to purchase approximately 24% of the outstanding
shares of common stock of TAC on a fully diluted basis for a nominal price.
Roland E. Sledge and Michael B. Smith, who are officers of Torch and the
Company, own 5.5% and 4.5%, respectively, of the common stock of Torch on a
fully diluted basis, and Charles C. Green III, director of the Company, holds
options to purchase 2.1% of the common stock of Torch on a fully diluted basis.
CERTAIN ACQUISITIONS
A joint venture 90% owned by the Company (the "Company Venture") acquired
7.6% and 23.3% interests in the Gas Plant and the Diamond M-Sharon Ridge Gas
Plant ("Diamond Plant"), respectively, in July 1993 for $8.5 million. In a
simultaneous transaction, a joint venture 90% owned by Torch (the "Torch
Venture") acquired 4.1% and 12.5% interests in the Gas Plant and Diamond Plant,
respectively, for $4.6 million. The other partner in the Company Venture is not
affiliated with the Company or Torch.
In December 1993, Torch sold its interests in the Torch Venture to
Associated Gas Resources, Inc. ("AGRI") for a promissory note in the amount of
$4.6 million, which bore interest at 7.0% per annum. In December 1993, the
Company acquired AGRI by merger. In March 1994, the Company repaid the $4.6
million note to Torch with borrowings under an existing credit facility.
Under the terms of the Administrative Services Agreement in effect at that
time, Torch became entitled to 2.5% of the consideration paid by the Company to
the shareholders of AGRI in such acquisition. In lieu of this fee,
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<PAGE>
the Company issued Torch a warrant, exercisable at any time prior to December
31, 1998, to purchase 187,500 shares of the Company's Common Stock for $6.40 per
share. In connection with the sale of the capital stock of Torch to TAC in 1996,
Torch transferred the warrant to United. In April 1997, such warrant was
exercised by United in connection with the Partnership Transactions.
MINING VENTURES
During fiscal year 1992, the Company acquired an average 24.4% interest in
three mining ventures (the "Mining Ventures") from an unaffiliated person for
$128,500. At the time of such acquisition, Mr. Bryan, his brother and Robert L.
Gerry, III, then a director of Nuevo (the "Affiliated Group"), owned an average
21.5% interest in the Mining Ventures. The Company's interest in the Mining
Ventures increased as it paid costs of the venture. As of June 30, 1997, the
Company had invested $370,000 in the Mining Ventures.
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total stockholder return on its Common Stock (assuming reinvestment
of dividends at a date of payment into Common Stock of the Company) to the
cumulative total return on the NASDAQ Market Index ("Broad Market") and the
cumulative total return on the Dow Jones Secondary Oil Index ("Industry Index")
from June 30, 1992 until June 30, 1997.
- ------------------------------------------------------------------
Bellwether Exp Industry Index Broad Market
- ------------------------------------------------------------------
1992 100 100 100
- ------------------------------------------------------------------
1993 150 118.87 122.76
- ------------------------------------------------------------------
1994 183.33 116.76 134.61
- ------------------------------------------------------------------
1995 200 128.97 157.88
- ------------------------------------------------------------------
1996 200 151.12 198.73
- ------------------------------------------------------------------
1997 334.38 178.05 239.4
- ------------------------------------------------------------------
-16-
<PAGE>
PROPOSAL II
APPROVAL OF AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN
INTRODUCTION
On September 12, 1997, the Compensation Committee of the Board of Directors
adopted an amendment to the Bellwether Exploration Company 1996 Plan, providing
for an increase in the number of shares of Common Stock available for
distribution thereunder by 500,000, subject to stockholder approval. The
following is a general description of certain features of the 1996 Plan.
GENERAL PLAN INFORMATION
The 1996 Plan was adopted for the benefit of the executive officers,
directors and other key employees and consultants of the Company and its
subsidiaries and affiliates and currently authorizes for issuance, upon the
exercise of stock options or grants of performance shares, an aggregate of
500,000 shares of the Company's Common Stocks, all but 25,500 shares of which
have already been utilized. The 1996 Plan was adopted subject to shareholder
approval by the Board of Directors of the Company on September 16, 1996 and
approved by the Company's stockholders on November 15, 1996.
The purpose of the 1996 Plan is to promote the interests of the Company by
providing incentives to the directors, officers and other key employees and
consultants of the Company and its subsidiaries and affiliates to use their best
efforts on the Company's behalf and to aid the Company in attracting,
maintaining and developing capable management personnel by offering such persons
competitive compensation levels and an opportunity to become stockholders of the
Company, thereby rewarding outstanding performance and continued employment.
ADMINISTRATION
The 1996 Plan may be administered by (i) the Board of Directors of the
Company, (ii) any duly constituted committee of the Board of Directors
consisting of at least two members of the Board of Directors, all of whom shall
be Non-Employee Directors, or (iii) any other duly constituted committee of the
Board of Directors. The administering party is referred to herein as the "Plan
Administrator." At the current time, the Compensation Committee of the Board of
Directors is serving as the Plan Administrator. A "Non-Employee Director" is
defined as any director who: (i) is not an officer of the Company or a parent
or subsidiary of the Company, or otherwise employed by the Company or parent or
subsidiary of the Company; (ii) does not receive compensation, either directly
or indirectly, from the Company or a parent or subsidiary of the Company, for
services rendered as a consultant or any capacity other than as a director,
except for an amount not exceeding $60,000; (iii) does not possess an interest
in any transaction for which disclosure would be required under Item 404(a) of
Regulation S-K of the Securities Act of 1933, as amended ("Securities Act"); or
(iv) is not engaged in a business relationship for which disclosure would be
required pursuant to Item 404(b) of Regulation S-K under the Securities Act.
The Plan Administrator selects the participants to whom options are to be
granted and, with respect to each option, determines the number of shares
covered thereby, the price payable on its exercise, and the period during which
it may be exercised, all in a manner not inconsistent with the 1996 Plan. The
Plan Administrator also resolves all questions of application or interpretation
of the 1996 Plan.
The names and addresses of the 1996 Compensation Committee members are:
Dr. Jack Birks, 1331 Lamar Street, Suite 1455, Houston, Texas 77010-3039; A. K.
McLanahan, 1331 Lamar Street, Suite 1455, Houston, Texas 77010-3039; and Vincent
H. Buckley, 1331 Lamar Street, Suite 1455, Houston, Texas 77010-3039.
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<PAGE>
DESCRIPTION OF COMMON STOCK
The Company has two classes of authorized capital stock, Common Stock and
preferred stock. The 1996 Plan currently authorizes the issuance, upon the
exercise of stock options by eligible participants, of an aggregate of 500,000
shares of the Company's Common Stock. Holders of Common Stock are entitled to
receive dividends if, when and as declared by the Board of Directors of the
Company out of funds legally available therefor. All shares of Common Stock
have equal voting rights on the basis of one vote per share on all matters to be
voted upon by stockholders. Cumulative voting for the election of directors is
not permitted. Shares of Common Stock have no preemptive, conversion, sinking
fund or redemption provisions and are not liable for further call or assessment.
Each share of Common Stock is entitled to share on a pro rata basis in any
assets available for distribution to the holders of the Company's equity
securities upon liquidation of the Company.
The Company has not paid any dividends on its Common Stock since its
formation. Although the Company intends to invest any future earnings in its
business, it may determine at some future date that the payment of cash
dividends would be desirable. The payment of any such dividends would depend,
among other things, upon the earnings and financial condition of the Company.
ELIGIBILITY
Participants in the 1996 Plan are selected by the Compensation Committee
from the directors, executive officers and other key employees and consultants
of the Company and its subsidiaries and affiliates who occupy responsible
managerial or professional positions and who have the capability of making a
substantial contribution to the success of the Company. In making this
selection and in determining the form and amount of awards, the Plan
Administrator may consider any factors deemed relevant, including the
individual's functions, responsibilities, value of services to the Company and
past and potential future contributions to the Company's profitability and
growth.
TYPES OF AWARDS
Awards under the 1996 Plan may be in the form of any one or more of the
following: stock options, incentive stock options, and performance shares. The
1996 Plan permits the granting of both incentive stock options ("ISOs"),
intended to qualify as such under the provisions of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and non-qualified options. To
qualify as ISOs, options must meet additional Federal income tax requirements.
These requirements include a limitation that the aggregate fair market value of
ISOs that first become exercisable during any calendar year may not exceed
$100,000. The term of each option will be fixed by the Plan Administrator but,
for ISOs, may not exceed ten years from date of grant. The Plan Administrator
will determine at which time or times each option may be exercised. Awards are
evidenced by award agreements, the terms and provisions of which may differ, in
form and substance satisfactory to the Plan Administrator and not inconsistent
with the 1996 Plan.
EXERCISE PRICE
A stock option entitles the grantee to purchase a set number of shares of
Common Stock at a set price ("Exercise Price"). The Exercise Price for each
share covered by an option will be an amount selected by the Plan Administrator
and will be 100% or more of the fair market value of a share of Common Stock on
the date the option is granted. The Exercise Price must be paid in full with
cash or by delivery of previously owned Common Stock valued at its fair market
value on the exercise date.
RESTRICTIONS
As soon as practicable after receipt of payment of the Exercise Price, the
Company will deliver to the optionee a certificate or certificates for such
shares of Common Stock represented by the option exercised.
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The optionee will become a stockholder of the Company with respect to Common
Stock represented by the share certificates issued and as such will be fully
entitled to receive dividends, to vote and to exercise all other rights of a
stockholder, including the right to dispose of such shares. Prior to the receipt
of certificates for shares of Common Stock, an optionee will have no rights of a
stockholder.
AUTOMATIC GRANTS
The 1996 Plan provides that each Non-Employee Director, on the date he or
she is initially elected or appointed and on the first business day following
the Annual Meeting of Stockholders of each subsequent year thereafter in which
the Non-Employee Director is still serving as a director, will automatically be
granted a stock option to purchase 4,000 shares of Common Stock for the fair
market price on the date of such grant.
PERFORMANCE SHARES
The Plan Administrator is also authorized to award shares of Common Stock
("performance shares") that are subject to certain conditions set forth in the
1996 Plan and subject to such other conditions and restrictions as the Plan
Administrator may determine, but without the payment of any consideration.
Performance Shares may, in the Plan Administrator's discretion, be subject to
forfeiture, in whole or in part, in the event that performance targets
established by the Plan Administrator are not met.
TAX INFORMATION
The following is a brief summary of the general rules relating to the tax
consequences under present Federal income tax laws with respect to grants under
the 1996 Plan:
TAXATION OF ISOs. No taxable income will be realized by an optionee upon
the grant or exercise of an ISO. If shares of Common Stock are issued to an
optionee pursuant to the exercise of an ISO and if no disposition of such shares
is made within two years after the date of grant or within one year after the
transfer of such shares to such optionee, then, upon the sale of such shares,
any amount realized in excess of the exercise price will be taxed to such
optionee as a long-term capital gain and any loss sustained will be a long-term
capital loss and no deduction will be allowed to the optionee's employer for
Federal income tax purposes. If no disqualifying disposition is made, the
exercise of an ISO will give rise to an adjustment in computing alternative
minimum taxable income that may result in alternative minimum tax liability for
the optionee.
If shares of Common Stock acquired upon the exercise of an ISO are disposed
of prior to the expiration of either of the holding periods described above, the
optionee in most instances will realize ordinary income in the year of such
disqualifying disposition in an amount equal to the excess (if any) of the fair
market value of the shares at exercise (or, if less, the amount realized on the
disposition of the shares) over the exercise price thereof and the optionee's
employer will be entitled to deduct such amount. Any additional gain realized
by the participant will be taxed as short-term or long-term capital gain,
depending on how long the shares have been held, and will not result in any
deduction by the employer. The holding period for long-term capital gain
treatment is more than one year.
If an ISO is exercised at a time when it no longer qualifies as an ISO, the
option will be treated as a non-qualified option. Subject to certain exceptions
for disability or death, an ISO generally will not be eligible for the tax
treatment described above if it is exercised more than three months following
the termination of employment.
TAXATION OF NON-QUALIFIED OPTIONS. No income will be realized by an
optionee at the time a non-qualified option is granted. In most instances,
ordinary income will be realized by the optionee upon exercise in an amount
equal to the difference between the fair market value of the shares on the date
of exercise and the exercise price (the amount paid for the shares) and the
optionee's employer will be entitled to a tax deduction in the same amount.
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<PAGE>
The disposition, appreciation (or depreciation) after the date of exercise will
be treated as either short-term or long-term capital gain (or loss) depending on
how long the shares have been held.
TAXATION OF COMMON STOCK USED TO EXERCISE OPTIONS. Shares of Common Stock
delivered to pay for shares of Common Stock purchased on the exercise of an ISO
or a non-qualified stock option will be valued at the fair market value at the
date of exercise. Unless the delivery of shares constitutes a disqualifying
disposition of shares acquired upon exercise of an ISO, no taxable gain or loss
on the surrendered shares will be realized at the time of delivery. For Federal
income tax purposes, the optionee receives the same tax basis and holding period
in a number of the new shares equal to the number of old shares exchanged. The
optionee will also receive a tax basis in the additional shares equal to zero in
the case of an ISO or equal to their fair market value at the date of exercise
in the case of a non-qualified stock option and a new holding period in either
case.
PERFORMANCE SHARES. A grantee normally will not realize taxable income and
the Company will not be entitled to a deduction upon the grant of performance
shares assuming the shares granted are subject to restrictions resulting in a
"substantial risk of forfeiture." When the shares are no longer subject to a
"substantial risk of forfeiture" or if there are no restrictions at the time of
grant, the grantee will realize taxable ordinary income in an amount equal to
the fair market value of the stock at that time and the Company will be entitled
to a deduction in the same amount. A grantee, however, may elect to realize
taxable ordinary income in the year the restricted stock is granted in an amount
equal to their fair market value at the time of grant, determined without regard
to the restrictions. In that event, the Company will be entitled to a deduction
in such year in the same amount, and any gain or loss realized by the grantee
upon the subsequent disposition of the shares will be taxable at short or long-
term capital gain rates but will not result in any further deduction to the
Company.
WITHHOLDING. The Company has the right to require an optionee or grantee
to remit an amount necessary to satisfy any Federal, state or local tax
withholding requirements prior to the delivery of certificates for such shares.
An optionee or grantee may be required to deposit cash with the Company in an
amount necessary to satisfy the applicable Federal and state law requirements
with respect to withholding of taxes on wages. Alternatively, the Company may
issue such shares, net of the number of shares sufficient to satisfy the
withholding requirements. For withholding purposes, Common Stock will be valued
on the date the withholding obligation is incurred.
TAX ELECTION. Recipients of options who are persons ("Section 16(a)
Option Holders") described in Section 16(a) of the Exchange Act, at the time of
exercise of an option may elect, in lieu of paying to the Company an amount
required to be withheld under applicable tax laws in connection with the
exercise of an option in whole or in part, to have the Company withhold shares
of Common Stock having a fair market value equal to the amount required to be
withheld. Such election may not be made prior to six months following the grant
of the option, except in the event of a Section 16(a) Option Holder's death or
disability. The election may be made at the time the option is exercised by
notifying the Company of the election, specifying the amount of such withholding
and the date on which the number of shares to be withheld is to be determined
("Tax Date"), which shall be either (i) the date the option is exercised or (ii)
a date six months after the option is exercised; provided, however, the Tax Date
shall not be the exercise date unless the option is exercised during the ten-day
period beginning on the third day following the release of the Company's
quarterly or annual statement of revenues and earnings. The number of shares of
Common Stock to be withheld to satisfy the tax obligation shall be the amount of
such tax liability divided by the fair market value of the Common Stock on the
Tax Date (or if not a business day, on the next closest business day). If the
Tax Date is not the exercise date, the Company may issue the full number of
shares of Common Stock to which the Section 16(a) Option Holder is entitled, and
such option holder shall be obligated to tender to the Company on the Tax Date a
number of such shares necessary to satisfy the withholding obligation.
Certificates representing such shares of Common Stock must bear a legend
describing such Section 16(a) Option Holder's obligation hereunder.
OTHER TAX INFORMATION. The foregoing does not constitute a definitive
statement on the tax effects of awards under the 1996 Plan and is based on the
laws and regulations presently in effect. There can be no assurance
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<PAGE>
that the tax consequences as discussed above will continue or that other tax
laws will not be applicable. Accordingly, it is suggested that prior to
exercising an award granted under the 1996 Plan and prior to disposing of shares
of Common Stock acquired pursuant to an exercise thereof, a grantee should
consult his tax advisor.
The 1996 Plan is not qualified under Section 401(a) of the Code.
ASSIGNMENT OF INTEREST
No award granted under the 1996 Plan is assignable or transferable other
than by will or by the laws of the descent and distribution. During the
lifetime of the optionee, the award may be exercisable only by the optionee.
TERMINATION OF EMPLOYMENT
Upon the termination of an optionee's employment, all stock options shall
likewise terminate immediately unless (i) the termination was the result of
retirement or permanent disability (as each is determined by the Plan
Administrator), in which case the optionee may within six months exercise any
awards to the extent such awards are exercisable during the six month period
(ii) the termination was caused by the optionee's death, in which case any
rights exercisable on the date of death may be exercised by the optionee's
estate, or by a person acquiring such right by bequest or inheritance, provided
that such exercise occurs within both the remaining effective term of the awards
and one year after the optionee's death or (iii) the termination was caused by
reason other than death, retirement, disability or cause (as determined by the
Plan Administrator), in which case the optionee may within 120 days exercise any
awards to the extent such awards are exercisable during such 120-day period.
Assuming the term of an ISO granted under the 1996 Plan has not otherwise
expired, upon termination of employment (i) by reason of death or permanent
disability, the ISO shall remain exercisable for a period of up to one year,
(ii) by reason of retirement, the ISO shall remain exercisable for a period of
up to three months, and (iii) by reason other than death, permanent disability,
retirement or cause, the ISO shall remain exercisable for a period of up to 30
days. If an employee is terminated for cause, his ISO's will be immediately
canceled. If an employee is terminated for any reason, his unvested performance
shares will be immediately forfeited.
AMENDMENT AND TERMINATION
The Plan Administrator is permitted to amend the 1996 Plan without further
approval by the stockholders, except that any amendment, though effective when
made, will be subject to stockholder approval if required by any Federal or
state law or regulation or by the rules of any stock exchange or automated
quotation system on which the Company's Common Stock may then be listed or
quoted. No amendment may adversely affect any outstanding grants without the
holder's consent.
CHANGES IN CAPITAL STRUCTURE
The 1996 Plan provides for proportionate adjustments upwards or downwards
upon an increase or decrease, respectively, in the number of shares of Common
Stock outstanding or other subdivision or consolidation of shares of Common
Stock. Upon the merger or consolidation of the Company in which the Company is
the survivor, each holder of an option will be entitled to receive upon exercise
the number and class of securities to which the holder would have been entitled
pursuant to the merger or consolidation agreement if, immediately prior to such
event, such holder had been the record holder of a number of shares of Common
Stock as to which such option was exercisable.
In the event of a merger or consolidation in which the Company is not the
surviving corporation, or in the event of a sale or other disposition of all of
the Company's assets to another entity, the Plan Administrator may elect any of
the following: (i) in the event the successor entity assumes the obligation to
deliver securities, to entitle each holder to receive upon exercise of an option
such securities as the holder would have been entitled to receive had
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<PAGE>
such option been exercised immediately prior to the merger or consolidation;
(ii) to waive any limitations with respect to an option or performance shares
such that such option becomes exercisable prior to the date of the merger,
consolidation or sale of assets or the vesting of the performance shares shall
occur upon such merger, consolidation or sale of assets; or (iii) to cancel all
outstanding options as of the effective date of such merger, consolidation or
sale, provided notice is given to each holder and each holder has the right to
exercise options for a period of not less than thirty days prior to the
effective date of the merger, consolidation or sale.
OTHER INFORMATION
The fair market value of the Common Stock shall be determined by the Plan
Administrator and, generally, shall be the average of the high and low sales
prices of the Common Stock as reported on the consolidated trading tables of The
Wall Street Journal on the date the option is granted. If at any time the
Common Stock shall not have been traded on National Association of Securities
Dealers, Inc. Automatic Quotation System/National Market or other public
securities market for more than 10 days immediately preceding such date, the
Plan Administrator may provide other appropriate means of determining fair
market value.
Optionees will not be given periodic reports on the status of their
options; however, grantees may obtain information as to the amount and status of
their options at any time upon written request to the Company. The Plan
Administrator may permit the Company to withhold Common Stock to satisfy all or
part of the optionee's withholding tax. The Common Stock will be valued at its
fair market value. The payment of withholding taxes by surrendering Common
Stock is subject to any restrictions the Plan Administrator may impose.
Neither the adoption of the 1996 Plan, or any amendment thereto, by the
Board of Directors nor the submission of the 1996 Plan, or any amendment
thereto, to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board of Directors to adopt such
other incentive arrangements as it may deem desirable including without
limitation, the granting of stock options otherwise than under the 1996 Plan,
and such arrangements may be either generally applicable or applicable only in
specific cases.
The 1996 Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended.
APPROVAL OF AMENDMENT TO 1996 PLAN
There are currently available for grant under the 1996 Plan 25,500 shares
of Common Stock. Management and the Board of Directors believe it is in the best
interest of the Company to increase the number of shares of Common Stock
available for distribution pursuant to the 1996 Plan by 500,000 shares to
increase the Company's ability to attract and retain the services of individuals
of outstanding quality and ability to serve in the offices and directorships of
the Company.
Approval of the amendment to the 1996 Plan requires the affirmative vote of
a majority of the outstanding shares of Common Stock present and voting at the
Annual Meeting in person or by proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE AMENDMENT
TO THE BELLWETHER EXPLORATION COMPANY 1996 STOCK INCENTIVE PLAN, AS IDENTIFIED
IN THE ENCLOSED PROXY CARD. PROXIES RECEIVED BY THE COMPANY WILL BE SO VOTED
UNLESS A CONTRARY VOTE IS SPECIFIED.
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<PAGE>
PROPOSAL III
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
Pursuant to the authority granted by the Company's Board of Directors, the
Company on September 30, 1997 adopted a change in its fiscal year to a calendar
year end, beginning with the period ending December 31, 1997.
The Stockholders will be asked to ratify the appointment of KPMG Peat
Marwick LLP as independent auditors of the Company and its subsidiaries for the
current period ending December 31, 1997.
The engagement of KPMG Peat Marwick LLP as independent auditors of the
Company is subject to approval by a majority of the shares of Common Stock
present, in person or by proxy, at the Annual Meeting.
A representative of KPMG Peat Marwick LLP will be present at the Annual
Meeting with an opportunity to make a statement if the representative so desires
and will be available to respond to appropriate questions.
MANAGEMENT RECOMMENDS THAT THE STOCKHOLDERS APPROVE AND RATIFY THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS OF THE COMPANY AND
ITS SUBSIDIARIES FOR THE PERIOD ENDING DECEMBER 31, 1997. PROXIES RECEIVED BY
THE COMPANY WILL BE SO VOTED UNLESS A CONTRARY VOTE IS SPECIFIED.
STOCKHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of stockholders of the Company that are intended to be presented
at the 1998 Annual Meeting of the Stockholders of the Company must be received
by the Secretary of the Company not less than 120 days in advance of May 30,
1998. Such proposals must be in conformity with all applicable legal provisions
including Rule 14a-8 of the General Rules and Regulations under the Exchange Act
and the Bylaws of the Company.
OTHER MATTERS
The cost of soliciting proxies, including the cost of preparing and mailing
this Proxy Statement and the expenses incurred by brokerage houses nominees and
fiduciaries in forwarding proxy materials to beneficial owners, will be borne by
the Company. In addition to solicitation by mail, certain directors, officers
and regular employees of the Company may solicit the return of proxies by
telephone, telecopy, fax telegram or personal interview. Such persons will
receive no additional compensation for such services. In addition, the Company
has retained MacKenzie Partners, Inc. to assist in soliciting proxies for a fee
of $3,500 plus out-of-pocket expenses.
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<PAGE>
The Board of Directors has no information that any matters other than those
referred to in this Proxy Statement will be brought before the Annual Meeting.
If, however, other matters should properly come before the meeting, the
accompanying proxy confers discretionary authority on the persons named therein
to vote thereon in accordance with the recommendations of the Board of
Directors.
By Order of the Board of
Directors
/s/ ROLAND E. SLEDGE
Roland E. Sledge
Secretary
October 27, 1997
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED JUNE 30, 1997 ARE AVAILABLE AT NO COST TO THE STOCKHOLDERS OF THE COMPANY
UPON WRITTEN REQUEST TO ROLAND E. SLEDGE, SECRETARY OF THE COMPANY, AT 1331
LAMAR STREET, SUITE 1455, HOUSTON, TEXAS 77010-3039.
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<PAGE>
PROXY
BELLWETHER EXPLORATION COMPANY
1331 LAMAR, SUITE 1455, HOUSTON, TEXAS 77010-3039
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE
ANNUAL MEETING ON NOVEMBER 21, 1997.
The undersigned hereby constitutes and appoints J. Darby Sere and Roland E.
Sledge and each of them, his true and lawful agents and proxies with full power
of substitution in each, to represent and to vote, as designated below, all of
the shares of common stock of Bellwether Exploration Company held of record by
the undersigned on October 10, 1997, at the Annual Meeting of Stockholders to
be held at the Houston Center Club, 1100 Caroline Street, Houston, Texas on
Friday, November 21, 1997, and at any adjournments thereof, on all matters
coming before said meeting. IF NO DIRECTION AS TO THE MANNER OF VOTING THE
PROXY IS MADE, THE PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR
ITEMS 2 AND 3 AS INDICATED ON THE REVERSE SIDE HEREOF.
Please check the box if you plan to attend the annual meeting on November
21, 1997. Proper identification will be required. [_]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS AND FOR PROPOSALS 2 AND 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR
PROPOSALS 2 AND 3.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE) BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY IN THE STAMPED,
PRE-ADDRESSED ENVELOPE ENCLOSED.
(TO BE SIGNED ON REVERSE SIDE)
X PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NOMINEES: J. P. Bryan
FOR WITHHELD J. Darby Sere FOR AGAINST ABSTAIN
1. Election of [_] [_] C. Barton Groves 2. To approve the adoption of an [_] [_] [_]
Directors Dr. Jack Birks amendment to the 1996 Stock
Vincent H. Buckley Incentive Plan
To withhold authority to vote for any Habib Kairouz
specific nominee(s), mark the "FOR" A. K. McLanahan 3. To ratify the appointment of [_] [_] [_]
box and write the name of each such Townes G. Pressler KPMG Peat Marwick LLP as
nominee on the line provided below. Charles C. Green, III independent public accountants
- ----------------------------------- 4. In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before
the meeting or any adjournments thereof.
</TABLE>
SIGNATURE(S) ____________________________________________ DATE _______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please indicate your full title as such.
